You borrow $149,000 to buy a house. The mortgage rate is 7.5 percent and the loan period is 30 years. Payments are made monthly. If you pay for the house according to the loan agreement, how much total interest will you pay?

Answer 1

let the payment be P

i = .075/12 = .00625
n = 12(30) = 360

P( 1 - 1.00625^-360)/.00625 = 149000
P = 1041.83

So interest = 1041.83(360) - 149000
= $226058.66

(the calculation of total interest paid is really not a realistic actuarial calculation, since we are ignoring the fact that the monies were calculated form different time spots, and since "time is money" , we are ignoring that critical fact by simply multiplying the payment times 360)

Answer 2

wondering what the difference is between future value, and present value, isn't that interest?